Sutton v. Sutton

Court of Appeals of New York637 N.E.2d 260 (1994)

Facts

The certificate of incorporation for Bag Bazaar, Ltd. was amended in 1963 to require the unanimous consent of all shareholders “for the transaction of any business…of the corporation, including amendment to the certificate of incorporation.” Since 1987, there have been three shareholders. Solomon Sutton (plaintiff), Yvette Sutton (plaintiff), and David Sutton (defendant) hold 30 percent, 40 percent, and 30 percent of the company’s stock, respectively. Disputes over management resulted in deadlock. At a 1992 shareholders’ meeting, Solomon and Yvette voted their 70 percent interest in favor of a resolution to eliminate the unanimity requirement in the certificate of incorporation. David opposed the resolution and refused to certify it as a director. Solomon and Yvette brought this action, seeking a declaratory judgment that the resolution was valid and an order compelling David to sign and file the resolution. They argue that a 1962 amendment to § 616(b) of the New York Business Corporation Law (BCL) permits a two-thirds vote of shareholders to eliminate a unanimity provision unless the certificate specifically addresses the possible amendment of the unanimity provision. The trial court agreed and granted the petition. The appellate court reversed. Solomon and Yvette now appeal.

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